Virtual lending finds a home in mortgage

Written by Dan Putney Managing Director, Mortgage solutions
Virtual lending finds a home in mortgage

Making your mortgage operation virtual friendly

As the Fed cut interest rates in the wake of the COVID-19 crisis, community banks and credit unions were awakened to a single fact: virtual lending had found a home in mortgage, and those financial institutions that were behind the curve in digital capabilities were feeling the pinch.

With record numbers of consumers now seeking to refinance and home buyers taking advantage of ultra-low interest rates to enter the market, there has never been a better time for community banks and credit unions to make their mortgage operations virtual-friendly.

The Refinancing Boom Underscores Virtual Preferences

When interest rates first flirted with three percent in March of 2020, mortgage lenders were besieged with an overwhelming wave of consumers seeking to refinance. Initially, to steady demand, banks and credit unions raised rates temporarily. But turning away business is a dangerous tactic. The current low rate environment compresses financial institutions’ margins, requiring more loans to generate profitability.

Fortunately, community banks and credit unions might now get their chance to do just that. According to Freddie Mac, interest rates fell to the lowest point ever seen in the U.S. in July 2020, sitting just under three percent. As a result, chief economist for, Danielle Hale, predicts another refi boom is in the offing for 2020. The Mortgage Bankers Association reported a 106.6% year-over-year increase in refinancing applications as of the week ending July 16.ii 

Lending Goes Virtual
Instant pre-approvals, 24/7 access to status updates, the ability to upload and sign documents digitally and a way to easily compare rates and terms, are just a few of the top demands consumers have for mortgage lenders, according to research conducted by McKinsey & Company.iii 

As community banks and credit unions embark on a journey toward this level of virtual lending, there are four overarching considerations that should guide the process:

Think Customer and Member Satisfaction: A consumer experience study conducted by Deloitte revealed that traditional financial institutions, such as banks and credit unions, trailed non-banks in customer satisfaction by 20% for new mortgages and as much as 30% for refinancing.iv 

PwC’s “Home Lending Experience Radar” survey could shed some light on why consumers are more satisfied with non-bank lenders. The study revealed that 83% of consumers use online channels to apply for a mortgage and submit relevant documents.v   Seventy-six percent use online portals to check on the status of their 

This growing preference for online mortgage origination should be a wake-up call to community banks and credit unions. Virtual lending is here to stay and is fast becoming the preference of the majority of consumers.

Support Remote Work Environments: In the wake of the COVID-19 crisis, many banks and credit unions continue to work remotely. As a result, they are seeking to support remote work environments with digital solutions, which provide secure anytime, anywhere access, as opposed to on premise systems that require employees to enter the office in order to facilitate mortgage transactions.

These digital solutions enable financial institutions to realize additional efficiency gains, as well. A comprehensive point of sale solution and a cloud-based loan origination platform can work in tandem to move customers seamlessly through the mortgage process, allowing bank employees to spend their time on more value-added tasks. We’ve seen this put community banks and credit unions on track to double revenue with the same operations staff.vii

Mind the Data: While opportunities abound in the current market, it is important for community banks and credit unions to zero in on the right opportunities. Analytics applications can provide targeted insights to fuel lenders’ acquisition efforts by offering early identification of potential borrowers and providing targeted marketing messages.  

Analytics can also improve operational efficiency. The ability to measure operational processes to best-in-class internal and industry standards, allows lenders to assess current states and plan for precise improvements. For example, access to loan conversion data, including detailed insights such as the number of loans closed by branch or officer, and the average number of days to close, make it possible for sales and operational teams to pursue efforts that improve outcomes.  

Virtual is Just a Part of Omni-Channel:

While virtual interactions may be dominating banking, not all consumers want to engage online. The importance of meeting consumers through the channel they want to use cannot be understated.

Bringing this down to basics is simple: if a customer or member is looking at a home on Sunday and wants to meet with someone on Saturday to discuss their options, the bank or credit union can more efficiently guide the conversation with the right lending tools, such as a streamlined application process and instant pre-approvals.

However, if a customer or member can’t get off work to meet in person, or simply wants to engage through online channels, community banks and credit unions need to provide convenient channel options, supporting customers who want to apply online or simply explore interest rates and loan options using a computer or mobile device.

Preparing for Your Home in Lending

Banks still capture 75% of first-time buyers,viii  but the higher levels of satisfaction granted online lenders proves that virtual certainly has a home in mortgage. In fact, 83% of respondents to a recent study indicated interest in using an online application when applying for a mortgage.ix

To maintain the leading edge, community banks and credit unions will need to increase their virtual presence and use digital to increase efficiency if they want to maintain their own home in the mortgage market.

Clare Trapasso. “Will the Lowest Mortgage Rates Ever seen Spur Another Refinance Boom?”, Jul. 16, 2020.
ii  ibid.
iii  Ayush Madan, et al. “Competing on Customer Experience in US Mortgage.” McKinsey & Company, Dec. 10, 2019. Web.
iv  ibid.
v  “Home Lending Experience Radar 2018.” PwC, 2018. Web.
vi  Ibid.
vii  “Fusion Mortgagebot.” Finastra. Retrieved from:
viii Ayush Madan, et al. “Competing on Customer Experience in US Mortgage.” McKinsey & Company, Dec. 10, 2019. Web.
ix  “Essent First-Time Homebuyers Study.” Edelman Intelligence. Retrieved from:

Written by
Dan Putney

Dan Putney

Managing Director, Mortgage solutions

Dan Putney is the Managing Director for the Northeast Region within Finastra’s North American Community Markets division. With more than two decades of knowledge and expertise in the mortgage and mortgage technology industries, he serves as the firm’s Center of Excellence for the Mortgage business.

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